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2011 MarsdenLR 2358
HIGH COURT MALAYA, KUALA LUMPUR
PRE-SYSTEM ENTERPRISE SDN BHD – Appellant
Versus
HONG LEONG ASSURANCE BHD – Respondent
[Guaman Sibil No: D22-1650-2009]
The court ruled that a theft could be considered 'sudden and unforeseen' despite prior incidents, maintaining that the burden of proof for exclusions lies with the insurer.
Headnote:(A) Contractors All Risk Policy - Insurance coverage - Plaintiff's claim for stolen electrical wiring denied on grounds of loss not being 'sudden or unforeseen', willful neglect, and inadequate security measures - Court determined loss was sudden and unforeseen, differing from previous thefts, and Defendant failed to establish willful neglect - (Paras 2, 4, 6, 16, 33)
(B) Burden of proof - Insured bears burden to prove claim within policy but insurer must demonstrate exclusions apply - Court concluded Plaintiff took reasonable precautions and did not exhibit willful negligence - (Paras 21, 31)
Facts of the case:
Plaintiff, a contractor, insured a construction project totaling RM 22,920,000, claimed RM 259,688 for stolen wiring when the project was 90% complete; Defendant denied claim on multiple grounds including prior thefts.
Findings of Court:
Court found the theft 'sudden and unforeseen', rejected arguments of willful neglect, and concluded the claim was payable.
Issues: Whether the theft was 'sudden and unforeseen'; whether Plaintiff's actions constituted willful neglect or inadequate security measures.
Ratio Decidendi: Court held that theft could be sudden and unforeseen despite prior incidents, focusing on policy interpretation; adequate measures were taken by the Plaintiff, thus no exclusion applied.
Result: Plaintiff’s claim allowed for RM 210,000 plus interest and costs.
| Table of Content |
|---|
| 1. insurance policy details and theft claim initiation. (Para 1 , 2 , 3) |
| 2. foreseeability of theft under the insurance policy. (Para 10 , 11 , 12 , 13 , 14) |
| 3. interpretation of 'sudden and unforeseen' in insurance. (Para 15 , 16 , 17 , 19 , 20) |
| 4. application of general exclusions and conditions. (Para 22 , 23 , 24) |
| 5. assessment of security measures and claims. (Para 26 , 28 , 30) |
| 6. court's decision in favor of the plaintiff. (Para 33) |
GROUNDS OF DECISION
1. The Plaintiff, a contractor, took out a Contractors All Risk [CAR] Policy from the Defendant, an insurance company. The Policy was to provide cover for any material damage that the Plaintiff may suffer during its contract to build 62 units of double-storey houses at Lots 586, 598, 655 and 597 Mukim Ulu Kelang, Daerah Gombak, Selangor. Mechanical and electrical work formed part of the contract work that was insured for a total sum of RM 22,920,000.00.The original period of insurance was from 3.11.2004 to 6.7.2006. This period was extended by 7 months to 6.2.2007 when there was a delay in the progress of the contract works.
2. On 26.10.2006, the Plaintiff discovered electrical cables and related paraphernalia [described by the loss adjusters as "internal electrical wiring"] stolen from its site, specifically from the houses built on Lots 586, 598 and 597. At that time, the project was 90% completed. The loss was estimated at RM 259,688.00 and a claim was then lodged with the Defendant. By letter dated 12.7.2007, the Defendant rejected the Plaintiff's claim on 3 grounds:-
a. that the loss did not fall within the ambit of the operative clause of Section I as the loss was not "sudden or unforeseen";
b. that General Exclusion (c) applied as there was willful neglect on the part of the Plaintiff which had contributed and aggravated the loss claimed;
c. that General Condition No. 3 was invoked as the Plaintiff had taken inadequate measures to prevent the theft losses.
3. The Plaintiff was obviously dissatisfied with the Defendant's decision and so the present proceedings were then instituted. Before the start of the trial, the parties agreed on the quantum of RM 210,000.00 leaving the issues of liability, interests and costs to be determined by the Court.
Was the loss "sudden and unforeseen"?
4. Section I - Material Damage clause of the CAR Policy provides that:-
The Insurers hereby agree with the Insured that if at the time during the period of cover the items or any part thereof entered in the Schedule shall suffer any unforeseen and sudden physical loss or damage from any cause, other than those specifically excluded, in a manner necessitating repair or replacement, the insurers will indemnify the Insured in respect of such loss or damage ...
5. It is settled law that the Plaintiff bears the burden of proving on a balance of probabilities that the claim was within the cover of the Policy, in particular Section I in that the loss was "unforeseen and sudden".
6. At the trial, the Plaintiff called 3 witnesses, namely Mr. Chay Kam Yuin [PW1], the Plaintiff's Managing Director; Mr. Lee Kok Wai [PW2], and Mr. Lee Keng Choy [PW3], the Plaintiff's Site Manager.
7. I shall start with Mr. Lee Kok Wai [PW2] as he was the person who discovered the theft. He was the wireman who had installed the electrical work in the units built. At around 11.45 in the morning of 26.10.2006, PW2 returned to the site to carry out testing and commissioning of the electrical work. After unlocking the first house with the key that he had obtained from PW3 and upon entering the house, he discovered the electrical cabling or wiring that he had earlier installed, missing. He then informed PW3 who asked him to check the whole site to see if other houses were similarly affected. He discovered that the wiring in 35 of 62 units had been "cut and stolen". These 35 units were located in different locations as the project consisted of 5 rows of terraced double-storey houses. There were no visible signs of brea
